I've been fairly quiet on the Novo Resources Corp. (NVO:TSX.V; NSRPF:OTCQX) front for months in anticipation of assay results that will better define the project.
I believe that I have pretty much understood the potential for gold in the Pilbara since Quinton Hennigh, Mark Creasy and I sat down in Mark's office to discuss the Pilbara basin at length for hours in June of 2009. It was my first visit to the area of five in total. Quinton and I spent another week together in the field pretty much verifying his theory.
Mark has more money than God; God naturally not particularly needing much more than pocket change, and it took him three years, until the summer of 2012 to agree to the same terms he wanted in the summer of 2009. I wrote my first piece in August of 2012 and again, pretty much got it. I made it clear I thought this had Vits potential and Novo would be a 10-100 bagger. It does and it did.
I like Beaton's Creek a lot and it would be a mine today if it weren't located right next to a $100 million mill. Only an idiot would put two $100 million mills right next to each other. Beaton's Creek ore is oxide and the mill at Millennium Minerals is an oxide mill. It actually never occurred to me that they couldn't add two plus two. But they can't. Novo got it, Millennium didn't.
Then Karratha came up and Quinton got it right away. That was the big Kahuna. He put out a press release in July that gave it away. He ran out and staked half of the Southern Hemisphere and started drilling. That's where the problems started. Comet Well and Purdy's Reward are coarse gold systems. The gold is big, all nuggets.
I should throw this in because 99.99% of investors, indeed even professionals in the mining industry, don't know there is a definition for a nugget. A nugget is a piece of gold that when dropped from 30 inches above a metal gold pan makes a noise.
The vast majority of placer gold is small. I had a gold project in Tanzania where a gram of gold would be 2,000-3,000 individual pieces. If you dropped them from 30 inches above a metal gold pan some of them would still be floating to earth a week later.
Nuggety gold systems are a bugger to measure according to the industry Bible/Ten Commandments, 43-101. Think of an ounce of gold being in a cube and trying to find it by drilling into a cubic meter of rock. Literally you can't. That's a vital to understand fact that I brought up six months or more ago and only two guys in the industry understand. That would be Keith Barron and me.
You can drill nuggety gold until the cows come home and you will not come up with an accurate 43-101 grade. When Novo drilled Beaton's Creek where the gold was far smaller Quinton came up with a 43-101 grade and put it out the results just the way he was required to. I took a gold pan and panned a sample and told Quinton that his numbers were bullshit; the grade was a lot higher than he thought. You may safely believe that he thought I had lost my mind.
When Novo did a 5,000-ton trial mining test, it confirmed the actual grade mined was 50% higher than the 43-101 drilling suggested. When you drill nuggety gold that can be measured such as that at Beaton's Creek you will almost always have higher grade than your 43-101 tells you.
I made the very valid point as far back as September of 2017 that the gold at Comet Well and Purdy's is unconventional and you have to think outside the box to understand how to approach it. 43-101 cannot bind you in your thinking.
I have been in three different industries where to be successful you needed specialist knowledge. That would be flying, computers and mining. Flying is pretty easy. Once a pilot knows what direction up is and the difference between right and left, he pretty much gets it. Pull back, go up. Push forward, go down. How much easier can it be?
Computers on the other hand can be a handful. Some of the most successful programmers taught themselves. I don't know how they got the education but they did. I think there could be a lot of voodoo to it. Certainly the college courses I have seen were always years behind what the industry was doing.
Mining and exploration require a whole slew of knowledge about a lot of things. Geology, chemistry, economics and finance are all part of just the basics. I know of no industry with so many PhDs and advanced degrees. Not only that, they also have to be conversant with the reporting requirements of 43-101, JORC and local government rules and regulations to avoid legal issues.
In the process of filling their heads with a lot of information perhaps the budding mining folks have forgotten to think for themselves.
I only know of three people who understand the Karratha gold potential. I am sure there are more but there are only three that I can point to and say, he gets it. That would be Quinton Hennigh, Keith Barron and me. But if you took a Roman geologist or Spanish mine manager and showed them the gold at Karratha, they would instantly get it and would have been mining 18 months ago. Because they weren't overeducated and didn't have the noose of 43-101 around their necks.
Quinton Hennigh is an exploration geologist, one of the top three in the world but maybe he has forgotten one important thing. Exploration is a journey, not the destination. Mining is the art and science of extracting minerals from the ground at a profit. Mining is profit, exploration is expense.
It's taken ten months to deliver five assays. At some point your loyal investors are going to start dying off and you will have to find new ones. Some will kick the bucket and some will be bored to death.
You can't measure nuggety gold at Comet Well and Purdy's using conventional techniques. You have to think outside the box. All of the professionals and even the non-professionals who have visited those projects have concluded they are hard rock projects and you have to use conventional techniques. Only two people think otherwise and they do get it. That would be Keith Barron and me.
Those aren't hard rock projects. They are placer projects but where the gravel is a little more tightly packed than usual.
Now let me give you a little education about placer projects. Because all placer mining is about is moving dirt from one place to another and you use earth-moving equipment to do it, the standard of measurement is cubic yards or cubic meters.
In hard rock mining you use tons, in placer you use cubic yards. A cubic yard has about 2.5 tons of rock. And I am going to ignore the difference between cubic meters and yards, each would be correct depending on location and the size is about the same.
In placer mining you can make money at 0.2 grams per meter gold. With today's price of gold, that makes a cubic meter worth about $8. As a rule of thumb, it costs you about $1 move a cubic meter. The key to being profitable is to move the material as few times as possible.
Digging out a cubic meter of gravel with an excavator costs $1. Putting it in a dump truck costs $1. Running it through the mill costs $1. Taking the tailings and stacking them in a waste pile costs $1.
This is where Novo's latest press release scared those who are servants to 43-101. Novo reported two assays, one of 10.4 g/t gold and the second of 1.5 g/t gold. But those are tons and you have to convert to yards and cubic meters to compare. 1.5 g/t is $60 rock if you think hard rock but it's $150 rock if you understand you are mining placer.
Placer miners need to have some rough idea of grade. While there are reporting requirements, every placer miner understands the grade is nothing but a guess due to the variation in grade from one spot to another.
Determining grade because 43-101 says it's a requirement is bullshit. The Romans didn't do it, the Spanish didn't do it and Novo doesn't need to do it. The only value to knowing grade is to make a mining decision. And the chatboard cowboys who seem to know everything have forgotten or never knew why we drill is to make a mining decision. Is it profitable or not? If it is not, move on.
There is gold at Comet Well and Purdy's. Once you realize you are not dealing with hard rock but rather are doing nothing more than placer mining gravel, it becomes far easier to understand. You just need a little ANFO and a blasting cap and you have instant gravel.
You put that through a placer plant and then you pay big dividends to shareholders. That might cost you $15 a yard but with $150 rock you can make a lot of money. Isn't that what mining is supposed to be? With 10.4 g/t gold you have $1040 a cubic meter rock. That's really profitable.
Novo is an advertiser. I own a lot of shares, and I'm really biased. Do your own due diligence.
Novo Resources
NVO-V $4.73 (Jun 08 2018)
NSRPF $3.65 OTCQX 158 million shares
Novo Resources website.
Bob and Barb Moriarty brought 321gold.com to the Internet almost 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.
Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.
Disclosure:
1) Bob Moriarty: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Novo Resources. Novo Resources is an advertiser on 321 Gold. I determined which companies would be included in this article based on my research and understanding of the sector.
2) The following companies mentioned are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.
